SAGE Publications Los Angeles/London/New Delhi/Singapore DOI: 10.1177/097380100700200102 Do Insurance Sector Growth and Reforms Affect Economic Development? Empirical Evidence from India

A well-developed insurance sector is necessary for the economic development of an emerging economy like India, as it provides long-term funds for physical and social infrastructure, while simultaneously strengthening risk-taking abilities. The investment requirements for India in the coming years are well-known and the rapid growth of the insurance sector in the post-liberalisation period is seen as a good sign as it can, to some extent, facilitate investment in infrastructure development to help sustain the economic growth of the country. Against this backdrop, this paper raises an important question: what has been the contribution of insurance sector growth to economic development in India? The paper further examines the economic growth effects of insurance sector reforms and the rate of growth of insurance reforms. The claims brought forward by this study are mixed. The contribution of the insurance sector to economic development is positive and exhibits a long-run equilibrium relationship. We fi nd that reforms exert no strong relationship, but the rate of growth of reforms has a positive infl uence on economic development. The study therefore suggests that in order to make the insurance sector a more important component of the fi nancial intermediation process, complete deregulatio